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Billionaire Feels Sting of Line Item Veto

In using one of his first three line item vetoes, President Clinton today dashed a Texas billionaire's plan to preserve a capital gains tax break while renegotiating the sale of one of his businesses. And in doing so, Mr. Clinton highlighted the sort of special benefits that have long found their way into the nation's tax laws, often to the benefit of only a handful of wealthy or influential people.

In this case, the President unraveled the plans of 2,000 beet farmers and of Harold C. Simmons, who has given more than $1 million to Republican candidates and causes since the early 1980's. A provision in the tax bill, included at the behest of several members of Congress, would have granted Mr. Simmons and the Oregon beet farmers something they all desired: a graceful exit out of a cumbersome joint venture they had formed for the sole purpose of cutting Mr. Simmons's tax bill.

To defer or avoid at least $80 million in capital gains taxes on the sale of a beet-sugar refining company, Mr. Simmons formed the joint venture with the Snake River Sugar Cooperative, which the beet farmers had set up for the purpose. The joint venture was to own the plant, sharing profits. Under existing tax laws, this arrangement was not technically a sale, and Mr. Simmons owed no capital gains taxes, even though the cooperative paid him $260 million.

Originally, Mr. Simmons wanted to sell the business, the Amalgamated Sugar Company, but then he would have owed the taxes. Mr. Simmons wanted to renegotiate the deal this year to sell the company directly to the farmers, and the vetoed provision in the new tax law would have let him do so while preserving his tax break: the measure would have permitted the seller of a crop-processing plant to defer or, in effect, avoid capital gains taxes. The farmers also preferred to renegotiate the deal, saying it would greatly lower their borrowing costs on the loan to buy into the joint venture.

Now, Snake River and the National Council of Farmer Cooperatives are pondering whether to challenge the veto in court, an action Mr. Simmons has pledged to support. ''This is a vendetta against Harold Simmons, and that's sad,'' said Allan M. Lipman, president of Snake River. ''They tried to shoot Harold Simmons, and instead they shot our 2,000 growers.''

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Mr. Lipman said the farmers would pay no more for buying the company, the nation's second-largest beet sugar refiner, directly. Stephen L. Watson, a vice president of Mr. Simmons's holding company, said that there was no such agreement, but that Mr. Simmons did not mean for a new deal to give him more cash.

The measure's backers, from both parties, say it was meant to compensate farmers and their cooperatives for the rollback of crop subsidies by making it easier for them to buy food processors, which often enjoy higher profits.

But Representative Charles E. Schumer, a Brooklyn and Queens Democrat, said in a letter to the President last week that the measure would benefit Mr. Simmons most of all, with a $104 million tax deferral. ''This is exactly the kind of special-interest tax break the line item veto was intended to eliminate,'' Mr. Schumer said.

Mr. Simmons said today that he already had his deferral and expected no tax break beyond the $80 million already deferred or avoided.

''The bottom line is this provision was for farmers, not Harold Simmons,'' his statement said.